Friday, March 22, 2013

Another Dividend Machine RTN March 22, 2013

Another example of a dividend company that meets all four dividend machine criteria is profiled below.  Raytheon is unloved because they are in the defense business and we all know that government spending on defense is under pressure.   However, I do not invest based on sentiment.  I invest based on the four criteria a stock must meet to be a dividend machine and Raytheon, RTN qualifies on all levels.

Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividends
Current Qtr Dividend
Annualized Div Yield
No. Years Div Increase
      since 2005
Debt/Equity ratio

Raytheon, RTN announces 9th consecutive annual dividend increase:

If you own Raytheon, symbol RTN, by April 3, 2013, you will receive a quarterly dividend of $.55 on May 2, 2013.   RTN’s new quarterly dividend is an increase of 10 percent.   Name one other investment you own that increased your income by 10 percent.

Raytheon, dividend machine fundamentals:

Look at the above table.   If you read this blog often, you are familiar with the format.  We look for companies that make more money in earnings than they pay out in dividends.    If they do not make more money than they payout, where do they get the money to pay you?  Do they borrow it?  Do they sell assets to create the cash?   In Raytheon’s case, they simply make a ton of money.  During the past four quarter RTN earned $5.65 per share.

We look for a company that pays out substantially more than the 10 year U.S. Treasury which pays about two percent.  RTN’s annualized dividend yield based on this most current dividend increase is 3.853 percent. 

Next we income investors have to get more money every year.  As noted above, this company has increased the dividend since 2005.

Finally we want a financially solid company.  We use debt to equity ratio of less than one or within industry standard to measure a company's financial stability.  One would think Raytheon would carry a heavy debt load after all they manufacture expensive stuff.  Boeing carries a D/E of 5.11 which is five times more than I like.  Raytheon on the other hand carries a D/E ratio of just .59.

Consider Raytheon, RTN, for the dividend portion of your portfolio.

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